Earlier this month, BlackRock CEO Larry Fink wrote a letter to the heads of every S&P 500 company that some people took as a dig at shareholder activists.

Fink cautioned against dividend payments and stock buybacks – an increasingly hot topic on Wall Street – and asked the executives to consider what's best for investors in the long run, rather than satisfying the short-term demands of investors like shareholder activists.

So how are the activists taking it? It turns out one well-known activist happened to bump into Fink outside a restaurant that same day.

Barry Rosenstein, a managing partner and co-portfolio manager at Jana Partners, described how that interaction went down on this week's episode of Wall Street Week:

"We started talking about it and the first thing [Fink] said to me was, ‘You know, everybody interprets this as my being anti-activist – I’m not.’ And I don’t think he was," said Rosenstein.

"I think he’s just saying the companies shouldn’t knee-jerk, just return capital. They ought to determine what the best return on invested capital is."

And, for the record, Fink never did say he's completely against activism. Here's an excerpt from the infamous letter:

There is nothing inherently wrong with returning capital to shareholders in a measured fashion, as part of a broader growth strategy—indeed, it can be a vital part of a responsible capital strategy. Nor are the demands of activists necessarily at odds with the interests of other shareholders; some activist investors take a longterm view and have pushed companies and their boards to make productive changes.

It is critical, however, to understand that corporate leaders’ duty of care and loyalty is not to every investor or trader who owns their companies’ shares at any moment in time, but to the company and its long-term owners.

BlackRock tends to hold invesments for years. Fink is worried about buybacks replacing investments in "innovation, skilled workforces or essential capital expenditures necessary to sustain long-term growth."

But Rosenstein didn't seem too fussed by the letter.

"We find BlackRock to be a very responsible shareholder and they weigh every activist campaign individually and make a decision whether it makes sense or not," he said.

So it looks like everybody's still getting along.

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When BlackRock CEO Larry Fink wrote to the chief executives of all the S&P 500 companies in April asking them to lay off on stock buybacks and dividend payouts, he ignited a debate about shareholder value.

Now, it's easy to point to activist investors as the villains who force boards to return cash to shareholders at the risk of damaging companies' long-term development.

But activists are not the only ones pushing for heightened returns.

Bloomberg's Alex Barinka reports that the CEOs of America's large cap companies have a lot to gain from it too.

Of the 15 (non-Wall Street) companies that returned the most money to shareholders via buybacks last year, 11 based their chief executives' compensation on earnings per share, total shareholder return, or both, according to the report.

So when a company like IBM spends money, say, buying back stock from investors, or paying out dividends, that tends to boost its share price. And when the share price goes up, so does the CEO's pay.

In fact, IBM's CEO Ginni Rometty depends quite a bit on operating earnings per share – almost 40 percent of her pay package is based on it, according to Bloomberg.

At Disney, CEO Bob Iger's performance-based stock award hinges both on total shareholder returns and earnings per share, compared with the S&P 500 index.

It's a win-win. Unless, like Fink, you believe that there's more to a board's mandate than short-term payouts.

"Corporate leaders’ duty of care and loyalty is not to every investor or trader who owns their companies’ shares at any moment in time, but to the company and its long-term owners," Fink wrote in his April letter.

Read the full story on Bloomberg »

SEE ALSO: You don't have to listen to ALL of your shareholders — just the right ones

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Billionaire activist investor Carl Icahn and Larry Fink, the CEO of multi-trillion dollar asset management firm BlackRock, were on a panel together at the CNBC/Institutional Investor Conference at the Pierre Hotel in New York. 

The panel, which focused on activist investing, started out cordially with both investors complimenting each other and saying that they respect each other (Icahn is notorious for that).

Then it got heated (Icahn is also notorious for that).

"I think BlackRock is an extremely dangerous company...Not that Larry is dangerous...What BlackRock is doing.... What is happening is very dangerous in our markets today," Icahn said.

What is happening is the rise of structured securities that BlackRock creates, like ETFs.

 Icahn said that he feels strongly that ETFs are "overpriced" and "extremely illiquid." He thinks that they are going to "blow up." 

The "respect" between these two men started when Fink wrote an open letter to Wall Street criticizing activist investing. Icahn, who has been pushing for change at the companies he invests in since the 1980s, is Wall Street's most prominent activist. That's what the two men were on stage to talk about.

But instead of going on the defensive about himself, Icahn was on the offensive against Fink and BlackRock.

"I'm not blaming Larry personally. I'm blaming BlackRock. I don't blame him in the sense that he's doing something nefarious," Icahn said. 

He thinks that situation is "extremely dangerous to this country." 

"BlackRock sells the idea of liquidity," Icahn before taking another swipe, "It's a dumb machine. The state could do it like the g-ddamn highway." 

Fink said the actual ETF process enhances liquidity. 

He later added that Icahn's characterization of ETFs is "flat out wrong." 

The moderator, CNBC's Scott "The Judge" Wapner, called Icahn out a few times for not being fair too. 

None of that phased him. Icahn said that he told his daughter that the market is like a party bus being driven by Larry Fink and Federal Reserve Chair Janet Yellen. That bus, he said, would spin out of control "and hit a black rock."

The crowd was howling.

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On Wednesday, legendary activist investor Carl Icahn and BlackRock CEO Larry Fink were supposed to debate activist investing in a live broadcast from the CNBC Delivering Alpha Conference.

But the conversation didn't quite go as planned.

Icahn is perhaps the most widely known activist investor.

Fink's firm manages $4.7 trillion in assets and invests passively in index funds and exchange-traded funds (ETFs).

The panel, called "The Alpha Debate: Activism," began with Fink's addressing some of the open letters he has written company CEOs who have been critical of activists. Fink said there were some "good" and some "bad" activists.

When it was Icahn's turn to speak, he turned the tables on Fink.

'An extremely dangerous company'

"I don't think I'll be a 'good activist' at the end of what we say," Icahn said, after first saying that he respected Fink.

Icahn blasted Fink's open letters as being a "sales pitch for BlackRock."

"Going in that letter, and I have them, but I'm not going to start reading them, but basically, they're telling these companies hey, look, we'll protect you if you go out and issue debt, because this is the long-term plan, has to be that you could acquire, issue debt, go — which is great for BlackRock, because the more debt out there, the people buy it, the more investment bankers love it, and BlackRock makes more money."

Icahn continued to dig in, and he slammed BlackRock as being an "extremely dangerous company."

The rest of the panel looked uncomfortable for Fink. It was like witnessing a car wreck you couldn't turn away from. (We've reached out to BlackRock about how he feels about it. We'll update when we hear back.)

We've included a transcript from CNBC of the exchange and screenshots highlighting the investors' body language below.

ICAHN: I would say this; that I think BlackRock is an extremely dangerous company, OK? [AUDIENCE LAUGHTER]

ICAHN: I mean not that Larry is dangerous. He's a good guy. What BlackRock is doing, and I really mean this — and I'll say what I mean. I'm too old to not say what I mean ...

ICAHN: ... that what's happening is very dangerous in our markets today.

ICAHN: As Larry said, high yields are now $1.5 trillion. $450 billion of that is in ETF, what have you.

ICAHN: More importantly, they are overpriced, because if you go down and look at the index — and now I could get into some arcane stuff, but what a lot of these guys do, including BlackRock and the others, is these things — high-yield bonds, as you know, if you trade them, are quite illiquid. And therefore, if somebody wants to buy them, they do what they call CDS. They sell insurance on them. So take the money they are given, buy five-year Treasurys, then they go and they buy insurance from a guy like me. As a result, I personally think the illiquidity increases. So these high yields are extremely illiquid and extremely overpriced.

SCOTT WAPNER: You're not really blaming Larry for concerns that you have —

ICAHN: Not blaming Larry personally, no. I am blaming BlackRock. I absolutely —

WAPNER: Let's let Larry respond, please.

ICAHN: I would like to answer — I don't blame him in the sense of doing something nefarious. I blame the whole situation — I have don't blame Larry for making money. That's his job. BlackRock should make money. That's what they do. I think the letter is a brilliant obfuscation; but what I am saying, the situation is extremely dangerous in this country. And what is going on because of BlackRock — let me finish it, because I really want to say what I'm saying. I'm not saying they are bad people. BlackRock sells the concept of liquidity. You pay more — when you go in, go into an ETF with BlackRock, you are paying more basis points than you are at Vanguard.

And it adds up to, just on the passive stuff — a dumb machine that tells you at the end of the day, here's a lot of money. Go buy the index. A dumb machine. The State could do it, like the goddamn highway, and they could use the money to help the homeless people, you know.

LATER ON IN THE INTERVIEW ...

ICAHN: I'm not here to single out BlackRock. BlackRock is there to make money. That's what Larry does. Does a great job at it. That's not the issue here.

ICAHN: The issue is, obviously, for every seller, there's a buyer. So sort of obfuscation. You want to buy an ETF? There's a guy to sell ETF, of course. How the hell do you buy it? However ...

FINK: That's true of any stock.

ICAHN: That's true of any stock. So why is that good or bad? I don't know why they have to say that. Sort of known. 'Hey, I'm going to buy something, you are going to sell it.' Otherwise, I can't buy it.

FINK: Or you have to buy it at a higher price.

ICAHN: So that is like a little — which I don't mean to be that critical, but it's like your letter. Let me go into what I'm saying. Look, that the ETFs right now are sold where you got 2 trillion of these things hanging out there somewhere in the world. What I am saying, very dangerous — in this country, the United States, it's 2 trillion.

ICAHN: What I'm saying to you is that here is the major problem in it, OK, that — and this is why BlackRock, I'm critical of what is going on.

ICAHN: You have management people sitting out here, all over the country, saying look, Mr. Jones calls them, or even an insurance company or even a pension fund — we can't make any income. We need income.

So the wealth-management guy looks, says, 'You can buy high yield.' They don't even know what you mean. 'What are the risks?' 'Well, BlackRock has a great name, they're sitting with $4.7 trillion. That's pretty good. And we could buy one of their ETFs. OK, woo, that sounds good. Why not?'

They don't know the price. They don't understand what the risk is. They buy that. And now they keep buying it. BlackRock is sort of a name on there. And this is one of the problems you had in '07, where you had brand names on a lot of these housing things; but worse than that, they believe — and wealth-management guys believe — there is liquidity here.

ICAHN: Here's what's going on in this country. Let me give you another statistic; that there used to be — new issues every year, $700 billion, $800 billion of high yield; but the bankers would own 40% of those. They would have them in their portfolios. $350 billion of the $700 billion would sit there. That was a great buffer. If anything really happened, if — with the high yield, if it was a critical thing, Greece blew up, that's not even that bad, but something worse would happen, OK. Everything starts pouring in to sell. There's $350 billion of them sitting there, and the banks would buy them.

Today, you have this year 1.5 trillion bonds in this country, not all high yield, but 1.5 trillion will be sold. The banks own 40 billion only. It's gone down from 50% to 4% or 5%. And the Volcker Rule on July 21 comes out, and it will be worse. The Volcker Rule is good. Banks should not be a last resort to sell. Banks should not have — I'm not here to criticize the Volcker Rule, but what it is bad for and what we are going to is we are going to a cliff.

ICAHN: I was telling my daughter, who does my Twitter thing, here's a great cartoon. You get this party mobile, and everybody, they're all having a drink. And in the drink, they're all having this drink, having fun. And you know who's pushing that thing? They're pushing it. It's Larry Fink and Janet Yellen, pushing that. And they're pushing the goddamn thing, but it got even better.

Let me finish my cartoon, and then you can yell at me. You are pushing this thing — somebody should have said this in '07. We should say it. This party thing is going. Janet wants — she wants to put the brakes on it. Larry says 'no.' The people in the party are yelling, 'No, no, don't touch those drinks. This is fun.' They are moving toward this cliff, see. And the cliff is there. And this thing is going to go over this cliff. And you know what's going to destroy —they are going to hit a black rock. That's right. That's what — not criticizing you. You do what you have to do.

When it was Fink's turn to speak, he told Icahn that the characterization of ETFs "as the issue" is "just flat-out wrong."

"You don't even have — the process of what ETFs do is wrong. It is just a tool for buying exposure. And so to characterize ETF that way, I would be happy to spend time with you over lunch — I will pay — and teach you about ETFs, but your characterization is wrong," Fink said.

Apparently after the panel, Icahn offered to buy Fink a drink.

They were also still talking to each other after the panel.

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Billionaire activist investor Carl Icahn has finished his "low interest rate party bus" cartoon slamming BlackRock CEO Larry Fink and Federal Reserve Chair Janet Yellen.

It's included in his new film "Danger Ahead," which warns about trouble looming in the financial markets.

Back in July, Icahn and Fink were supposed to debate activist investing in a live broadcast from the CNBC Delivering Alpha Conference. That's not what happened though.

Instead of a cordial conversation about activism, Icahn told Fink that BlackRock is an "extremely dangerous company."

"I think BlackRock is an extremely dangerous company...Not that Larry is dangerous...What BlackRock is doing.... What is happening is very dangerous in our markets today," Icahn said.

He was referring to the rise of structured securities that BlackRock creates like exchange-traded funds. BlackRock manages $4.7 trillion in assets and is the biggest ETF provider in thr world. 

Icahn said that he feels strongly that ETFs are "overpriced" and "extremely illiquid." He thinks that they are going to "blow up." 

To illustrate his point further, he described a cartoon he had thought of comparing the market to a "party bus" being driven by Fink and Yellen. That bus, he said, would go over a cliff "and hit a black rock." 

CARL ICAHN:"I was telling my daughter, who does my Twitter thing, here's a great cartoon. You get this party mobile, and everybody in this mobile. They're all on this party and they're all having a drink...They're all having this drink, having fun. And you know who's pushing that thing? They're pushing it. It's Larry Fink and Janet Yellen, pushing that. And they're pushing the God damn thing, but it got even better..."

SCOTT WAPNER: I don't think that's fair.

ICAHN: Can I finish my cartoon? And then you can yell at me. They're pushing this thing— fair or not, somebody should have said this in '07. We should say it. This party thing is going. Every now and then, Janet wants— she wants to put the brakes on it. Larry says, 'No. Let it go." And the people in the party are yelling, 'No, no, don't touch those brakes! This is fun!" They are moving toward this cliff, see. And the cliff is there. And this thing is going to go over this cliff. And you know what's going to destroy—they are going to hit a black rock. That's right. That's what I'm saying. And by the way, I'm not criticizing you. You do what you have to do."

"I said it laughingly," Icahn said in his new video. "But I will tell you this—I've seen this before a number of times. I've been around a long time. I saw it in '69, '74, '79, I tell ya '87, and then 2000 wasn't pretty. And I think a time is coming that might make some of those times look pretty good." 

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Markets have been going haywire.

And according to Larry Fink, CEO of BlackRock, that has the potential to lead to layoffs through the first half of the year.

BlackRock is the world's largest investor, with about $4.5 trillion under management.

Fink said in an interview Friday morning with CNBC that the market volatility of late could affect CEO confidence and could lead to more layoffs.

He said (emphasis ours):

Having a market decline like this in the first couple of weeks of the year really, in my mind, puts a negativity across the economy. A negativity to every CEO who is looking at his or her stock price. A negativity related to business and the forward thinking about businesses. I actually believe you're going to start seeing more layoffs in the middle part of the first quarter, definitely the second quarter because of this. If we don't see some swift rebound — and as I said I think we're going to have probably more pain before we have that lift — but I do believe by the second half of the year the markets going to be higher.

His comments stand in contrast to those of Jamie Dimon, CEO of JPMorgan. On a conference call Thursday, Dimon said that while those in the finance industry look at market turmoil every day, it was unlikely that "143 million Americans who have jobs look at it that much."

"We're not forecasting a recession — I think the US economy looks pretty good at this point," he continued.

Fink also had some interesting comments on consumer spending (emphasis ours):

We have to find out why consumers are not spending their energy savings. It's significant in all the years, when we've had these big declines, the consumers use that savings to spend and consume other things. We're not seeing that, we're seeing some consumption. My fear — and we've been talking about retirement in America — my fear is we're starting to — people coming to terms with what they have an inadequacy in their retirement.

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Billionaire hedge fund manager Leon Cooperman thinks that we're nearing a bottom in the stock market.

The market has been going nuts the last few days, and senior finance executives ranging from JPMorgan CEO Jamie Dimon to BlackRock CEO Larry Fink have set out their thoughts on the sell-off.

And now Cooperman has added his thoughts to the mix.

In a CNBC interview on Friday, Cooperman said that high-yield investors unable to sell their paper were shorting the S&P as a hedge.

"There is no liquidity in the credit market in the high-yield area. They can't sell their papers, so what they are doing is they are cross-hedging and shorting S&Ps," Cooperman said. "The S&P will just have to find a level that it is comfortable at. I would have thought that that level is not far from where we are presently."

Earlier in the day, Larry Fink said on CNBC that the stock market could sell off another 10% and that oil could test $24.

Cooperman said Fink is likely too pessimistic.

"I don't think we'll go down another 10%, but I wouldn't say it's impossible," he said.

He added that he doesn't think there will be a recession, and that the average common stock in 2016 will perform and catch up to Facebook, Amazon, Netflix and Google, the stocks which make up FANG. 

"I guess what I would say to you is I'm not selling," he said. "I'm holding on because I do believe it's a growth scare rather than a bear market."

SEE ALSO: Larry Fink thinks layoffs are coming

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For Larry Fink, CEO of BlackRock, the market chaos of the first few weeks of 2016 is a bit of short-term pain for a long-term gain.

Fink, who heads the world's largest investor, with about $4.5 trillion under management, said he thinks the markets will end the year higher.

But to get there, the market needs a bit of a shakeout.

"I do believe there is a need for blood in the street," he told CNBC during an interview at the World Economic Forum in Davos.

"We need to work out all the excess inventories. In energy the only way that’s going to happen is through bankruptcies of some of the oil companies as they stop pumping. So this is all good. This is a good process actually. This market correction weeds out the weak."

Some of the biggest names on Wall Street have been hobnobbing in Switzerland this past week, and the sharp sell-off through the first few weeks of the year has been one of the big talking points.

Scott Minerd, chief investment officer at Guggenheim Partners, echoed Fink, telling CNBC that the S&P 500 Index could drop another 10% to around 1650 to 1700. That drop, he told CNBC, would represent a buying opportunity. 

"When you look further out on the horizon, you look at where we are especially in asset categories like bank loans, high yield. This is a very interesting time for people to be putting money to work. So this is not 2008 or 2009."

Others are more bearish. Legendary hedge fund manager George Soros told Bloomberg TV earlier this week that he thinks China is transmitting its problems to the rest of the world.

Ray Dalio, the leader of the world's largest hedge fund, Bridgewater Associates, is worried about growth in the global economy. James Gorman, CEO at Morgan Stanley, has said he can't make sense of the market movements.

But according to Fink, the moves of the past few weeks are necessary.

"We can’t have a market that continues to go up," he said. "You need these corrections and you need to find out what is a true foundation of a market. And we’re testing that."

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Larry Fink, the chief executive at BlackRock, the world's biggest investor with $4.6 trillion, just sent a letter to chief executives at S&P 500 companies and large European corporations. 

The letter focuses on short-termism both in corporate America and Europe, but also in politics, and asks CEOs to better articulate their plans for the future.

Business Insider managed to get a hold of the letter and is running it in full below (emphasis ours):

Over the past several years, I have written to the CEOs of leading companies urging resistance to the powerful forces of short-termism afflicting corporate behavior. Reducing these pressures and working instead to invest in long-term growth remains an issue of paramount importance for BlackRock’s clients, most of whom are saving for retirement and other long-term goals, as well as for the entire global economy.

While we’ve heard strong support from corporate leaders for taking such a long-term view, many companies continue to engage in practices that may undermine their ability to invest for the future. Dividends paid out by S&P 500 companies in 2015 amounted to the highest proportion of their earnings since 2009. As of the end of the third quarter of 2015, buybacks were up 27% over 12 months. We certainly support returning excess cash to shareholders, but not at the expense of value-creating investment. We continue to urge companies to adopt balanced capital plans, appropriate for their respective industries, that support strategies for long-term growth.

We also believe that companies have an obligation to be open and transparent about their growth plans so that shareholders can evaluate them and companies’ progress in executing on those plans. 

We are asking that every CEO lay out for shareholders each year a strategic framework for long-term value creation. Additionally, because boards have a critical role to play in strategic planning, we believe CEOs should explicitly affirm that their boards have reviewed those plans. BlackRock’s corporate governance team, in their engagement with companies, will be looking for this framework and board review.

Annual shareholder letters and other communications to shareholders are too often backwards-looking and don’t do enough to articulate management’s vision and plans for the future. This perspective on the future, however, is what investors and all stakeholders truly need, including, for example, how the company is navigating the competitive landscape, how it is innovating, how it is adapting to technological disruption or geopolitical events, where it is investing and how it is developing its talent. As part of this effort, companies should work to develop financial metrics, suitable for each company and industry, that support a framework for long-term growth. Components of long-term compensation should be linked to these metrics.

We recognize that companies operate in fluid environments and face a challenging mix of external dynamics. Given the right context, long-term shareholders will understand, and even expect, that you will need to pivot in response to the changing environments you are navigating. But one reason for investors’ short-term horizons is that companies have not sufficiently educated them about the ecosystems they are operating in, what their competitive threats are and how technology and other innovations are impacting their businesses.

Without clearly articulated plans, companies risk losing the faith of long-term investors. Companies also expose themselves to the pressures of investors focused on maximizing near-term profit at the expense of long-term value. Indeed, some short-term investors (and analysts) offer more compelling visions for companies than the companies themselves, allowing these perspectives to fill the void and build support for potentially destabilizing actions.

Those activists who focus on long-term value creation sometimes do offer better strategies than management. In those cases, BlackRock’s corporate governance team will support activist plans. During the 2015 proxy season, in the 18 largest U.S. proxy contests (as measured by market cap), BlackRock voted with activists 39% of the time.

Nonetheless, we believe that companies are usually better served when ideas for value creation are part of an overall framework developed and driven by the company, rather than forced upon them in a proxy fight. With a better understanding of your long-term strategy, the process by which it is determined, and the external factors affecting your business, shareholders can put your annual financial results in the proper context.

Over time, as companies do a better job laying out their long-term growth frameworks, the need diminishes for quarterly EPS guidance, and we would urge companies to move away from providing it. Today’s culture of quarterly earnings hysteria is totally contrary to the long-term approach we need. To be clear, we do believe companies should still report quarterly results – “long-termism” should not be a substitute for transparency – but CEOs should be more focused in these reports on demonstrating progress against their strategic plans than a one-penny deviation from their EPS targets or analyst consensus estimates.

With clearly communicated and understood long-term plans in place, quarterly earnings reports would be transformed from an instrument of incessant short-termism into a building block of long-term behavior. They would serve as a useful “electrocardiogram” for companies, providing information on how companies are performing against the “baseline EKG” of their long-term plan for value creation.

We also are proposing that companies explicitly affirm to shareholders that their boards have reviewed their strategic plans. This review should be a rigorous process that provides the board the necessary context and allows for a robust debate. Boards have an obligation to review, understand, discuss and challenge a company’s strategy.

Generating sustainable returns over time requires a sharper focus not only on governance, but also on environmental and social factors facing companies today. These issues offer both risks and opportunities, but for too long, companies have not considered them core to their business – even when the world’s political leaders are increasingly focused on them, as demonstrated by the Paris Climate Accord. Over the long-term, environmental, social and governance (ESG) issues – ranging from climate change to diversity to board effectiveness – have real and quantifiable financial impacts.

At companies where ESG issues are handled well, they are often a signal of operational excellence. BlackRock has been undertaking a multi-year effort to integrate ESG considerations into our investment processes, and we expect companies to have strategies to manage these issues. Recent action from the U.S. Department of Labor makes clear that pension fund fiduciaries can include ESG factors in their decision making as well. We recognize that the culture of short-term results is not something that can be solved by CEOs and their boards alone. Investors, the media and public officials all have a role to play. In Washington (and other capitals), long-term is often defined as simply the next election cycle, an attitude that is eroding the economic foundations of our country.

Public officials must adopt policies that will support long-term value creation. Companies, for their part, must recognize that while advocating for more infrastructure or comprehensive tax reform may not bear fruit in the next quarter or two, the absence of effective long-term policies in these areas undermines the economic ecosystem in which companies function – and with it, their chances for long-term growth.

We note two areas, in particular, where policymakers taking a longer-term perspective could help support the growth of companies and the entire economy:

• First, tax policy too often lacks proper incentives for long-term behavior. With capital gains, for example, one year shouldn’t qualify as a long-term holding period. As I wrote last year, we need a capital gains regime that rewards long-term investment – with long-term treatment only after three years, and a decreasing tax rate for each year of ownership beyond that (potentially dropping to zero after 10 years).

• Second, chronic underinvestment in infrastructure in the U.S. – from roads to sewers to the power grid – will not only cost businesses and consumers $1.8 trillion over the next five years, but clearly represents a threat to the ability of companies to grow. At a time of massive global inequality, investment in infrastructure – and all its benefits, including job creation – is also critical for growth in most emerging markets around the world. Companies and investors must advocate for action to fill the gaping chasm between our massive infrastructure needs and squeezed government funding, including strategies for developing private-sector financing mechanisms.

Over the past few years, we’ve seen more and more discussion around how to foster a long-term mindset. While these discussions are encouraging, we will only achieve our goal by changing practices and policies, and CEOs of America’s leading companies have a vital role to play in that debate.

Corporate leaders have historically been a source of optimism about the future of our economy. At a time when there is so much anxiety and uncertainty in the capital markets, in our political discourse and across our society more broadly, it is critical that investors in particular hear a forward-looking vision about your own company’s prospects and the public policy you need to achieve consistent, sustainable growth. The solutions to these challenges are in our hands, and I ask that you join me in helping to answer them.

Sincerely,

Laurence D. Fink

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What does a 25-year-old know about trading bonds?

Maybe enough to help one investing giant solve a problem that Wall Street can't seem to get its head around.

BlackRock, which manages $4.6 trillion in assets, has a team of young traders thinking of ways to apply electronic trading to markets where it's not yet prevalent.

The program pairs young workers who are more adept at using technology — the firm calls them "medium-experienced"— with more experienced hands who know how to do things the old-fashioned way.

Supurna VedBrat, BlackRock's deputy head of trading, says the idea is to bring some new thinking to the table.

"Your 25-year-old may come up with a brilliant idea that somebody with 20 years' experience may not come up with just because they've been so attuned to the status quo," said VedBrat, who is also cohead of electronic trading and market structure.

"We have a nice combination of experience and young talent driving some of the change."

'Creating another channel of liquidity'

The status quo has already been upended in stock and derivatives markets. But one place where the switch to electronic trading is proving a challenge across Wall Street is corporate bonds.

That's because the bond market is more fragmented.

Think of it this way: If you want to buy common shares of Ford Motor, you can buy only one kind of stock. Its ticker is F, and there are always people looking to sell. But if you want to buy Ford Motor's bonds, there are many more to choose from, and for any individual bond there may not be enough people ready to sell to you.

In other words, filling an order to buy or sell bonds takes work. Iseult Conlin, a 29-year-old corporate bond trader at BlackRock, explained:

"The way that corporate bonds trade historically has been very relationship-driven — very over-the-counter, pick-up-the-phone, and dealer-quote oriented, where the informational advantage and inventory of bonds was very much with the broker-dealers."

But it is getting more difficult. There has been a drop in liquidity in the bond market, meaning it is harder to find willing buyers or sellers. That is at least in part because of new regulations that discourage banks from trading as liberally as they did before the financial crisis.

BlackRock is looking to electronic trading to help solve the problem, and it is pushing for other changes to the bond market. One idea is to create standardized corporate bonds and cut the number of types traded.

"The thought is, it gets people to coalesce around a smaller, finite set of products and that should enhance the depth and breadth," said Anthony Perrotta, TABB Group's global head of research and consulting.

Conlin acknowledged that the bond market wasn't going to really be electronic anytime soon but said there were small steps that could be taken.

And one big push is toward "all-to-all" trading, which enables buy-side funds to trade directly with other buy-side funds. One system that BlackRock has used since 2013 lets traders like Conlin throw a bond she may need to sell out into the entire marketplace and get responses from others funds without waiting for quotes from brokers.

"It's completely innovative and new in my market — it never was that way before — but if you think about it, you're creating another channel of liquidity."

'An investor that everybody wants to cater to'

Liquidity, or lack of it, is what's really behind BlackRock's experiment with younger and older traders.

A couple of years ago, BlackRock recognized that post-financial-crisis regulatory changes would lead to a "shift" in liquidity, according to BlackRock's VedBrat.

"Given that our needs were not decreasing, we just have to be a lot smarter and a lot more efficient," she said.

So BlackRock created the electronic trading and market structure group to look for solutions. VedBrat, who has a background in computer science, started her career as a software engineer in a research lab at IBM before working in banking for a few years.

BlackRock is not the only asset manager being proactive about e-trading — competitors including State Street, AllianceBernstein, and Pimco are taking strides to adapt as well. But as TABB Group's Perrotta noted, few actually have dedicated teams focused on market-structure issues.

"They've been one of the few asset-management firms that has been very focused on the specifics of market-structure change for a long time,"Perrotta said.

The point is to identify areas where there may not be enough liquidity and to find ways to create more.

BlackRock is able to spot those constraints and keep ahead of the game thanks, in large part, to its massive size and position in the market. It operates more or less in every part of the world, in every asset class, and in every product type.

"They have become for some time now an investor that everybody wants to cater to,"Perrotta said. "That not only means the intermediaries in the market, like securities dealers and banks, but it also means the vendors that facilitate risk transfer. So they're a high priority for everyone."

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Larry Fink's investment giant, BlackRock, is reportedly planning some job cuts.

The firm, which manages $4.6 trillion in assets, is planning to cut up to 400 jobs, according to Bloomberg's Sabrina Willmer and Kiel Porter.

The cuts would affect about 3% of BlackRock's 13,000 employees.

Fink in January predicted that there would be layoffs around this time of year due to market turbulence in the first part of 2016.

Here's what he said in a January interview with CNBC:

Having a market decline like this in the first couple of weeks of the year really, in my mind, puts a negativity across the economy. A negativity to every CEO who is looking at his or her stock price. A negativity related to business and the forward thinking about businesses. I actually believe you're going to start seeing more layoffs in the middle part of the first quarter, definitely the second quarter because of this. If we don't see some swift rebound — and as I said I think we're going to have probably more pain before we have that lift — but I do believe by the second half of the year the markets going to be higher.

He wasn't wrong.

Last week, job cuts were announced at Goldman Sachs, the Japanese bank Nomura, and Credit Suisse. Bank of America Merrill Lynch and Deutsche Bank have also cut headcount this year.

Business Insider has reached out to BlackRock for comment.

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BlackRock CEO Larry Fink says negative interest rates are lining up savers and the economy for "potentially dangerous financial and economic consequences."

In his annual letter to shareholders published Sunday, the head of the world's largest asset manager singled out the risk of subzero rates on the global economy.

Japan and some countries in Europe have lowered benchmark interest rates below zero to stimulate their economies by encouraging borrowing and spending.

Fink argued that the lower rates are, the more money savers need to put aside to meet their retirement income and other goals.

This lowers how much discretionary income they have left to spend. And as the backbone of the US economy, consumer spending could be a drag on growth if it decreases.

The Federal Reserve has said it has considered whether negative rates would work in the US as a monetary policy tool, though it's unlikely it would resort to using them.

Here's Fink (emphasis ours):

Not nearly enough attention has been paid to the toll these low rates — and now negative rates — are taking on the ability of investors to save and plan for the future. People need to invest more today to achieve their desired annual retirement income in the future. For example, a 35-year-old looking to generate $48,000 per year in retirement income beginning at age 65 would need to invest $178,000 today in a 5% interest rate environment. In a 2% interest rate environment, however, that individual would need to invest $563,000 (or 3.2 times as much) to achieve the same outcome in retirement.

This reality has profound implications for economic growth: consumers saving for retirement need to reduce spending if they are going to reach their retirement income goals and retirees with lower incomes will need to cut consumption as well. A monetary policy intended to spark growth, then, in fact, risks reducing consumer spending.

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BlackRock Inc., the world's largest asset manager, posted a 20 percent drop in first-quarter profit on Thursday amid a dramatic reversal in financial markets.

The New York-based company's net income fell to $657 million, or $3.92 per share, in the quarter, from $822 million, or $4.84 per share, a year earlier.

BlackRock attracted total long-term net inflows of $36.08 billion in the quarterly period, down from $70.44 billion in the same quarter of 2015.

On an adjusted basis, BlackRock earned $4.25 per share, falling short of the average analyst estimate of $4.29, according to Thomson Reuters I/B/E/S.

Chief Executive Officer Larry Fink attributed a portion of the decline to lower fees collected on investment products, such as hedge funds.

"The Street was anticipating higher performance fees," Fink said on CNBC television. "That's where the miss was."

In the last quarter of 2015, the company took in $54 billion into its funds despite weak and turbulent markets, driving profits higher. But the company nonetheless missed Wall Street analysts' expectations for that quarter.

BlackRock's iShares exchange-traded funds (ETFs) business took in $24.25 billion in new money in the latest quarter, down from $35.48 billion a year earlier.

The lion's share invested in ETFs went into bonds as U.S. markets began the year with one of their roughest starts ever only to regain their footing in February.

Net investment in fixed income was $52.17 billion, while $2.15 billion went into alternative investments.

BlackRock ended the quarter with $4.74 trillion in assets under management, up from $4.65 trillion at the end of 2015.

Up to Wednesday's close of $348.29, BlackRock's shares had risen about 2.3 percent since the start of the year.

BlackRock's stock traded nearly 5 percent lower at the end of 2015 than at the end of 2014, while a grouping of similar companies measured by the Dow Jones U.S. Asset Managers Index <.DJUSAG> fell by 12 percent. Over the year, the stock returned negative 2.3 percent, a figure that includes dividend payouts.

(Reporting by Sudarshan Varadhan in Bengaluru and Trevor Hunnicutt in New York; Editing by Anil D'Silva and Jeffrey Benkoe)

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BlackRock CEO Larry Fink is actually cheering a new regulation.

The new fiduciary rule set forth by President Obama's Department of Labor raises the standards of investment advice for retirement accounts, which means that investment advisers have to be more forthcoming about the products they offer investors for the more than $12 trillion in retirement accounts.

There has been some debate over the impact of the bill. Some politicians and onlookers say it will make retirement investing harder for average Americans, others believe it will help drive down the cost.

To Larry Fink, the move makes sense and will actually get more people into investing for retirement.

"Well probably most importantly BlackRock has supported the changes to the financial ecosystem. If we can enhance confidence with investors, I believe through that mechanism is going to increase and promote more investing, less savings in their bank accounts," said Fink in the company's quarterly earnings call.

"So the more investing and the more money clients are putting to work with greater confidence and then it's a benefit actually for the entire industry."

The biggest criticism of the bill is that by raising the standard of advice, it will make it more costly for advisers to keep or add clients. In turn, these advisers will be less likely to accept clients that may not net them much revenue. 

To Fink, however, the bill would prove to the average American that they are more taken care of, that their adviser isn't just there for the fees, which should make more people comfortable about putting their savings to work.

Here's Fink again (emphasis ours):

And I think that’s one of the big points that hasn't been part of a dialog and I think that’s a really important point. We need to have more investor confidence. I think one of the great problems we have with longevity, we in human agent process and importantly with the inability of so many people investing what I would call properly too much cash by their over emphasis in bonds. If they believe the DOL rules will give them better transparency, better certainty that they are treated well, and they invest more money for the long run.

In terms of his own business, Fink thinks that while it may take some getting used to BlackRock will be just fine.

"It's still too early to determine the outcome for the DOL rule more broadly, but I think we are as better positioned than any organization," he said.

"We believe it can be very powerful for our entire BlackRock solutions product suite ... I think if it means more business in passive [strategies] we will [benefit]. If it means more business in active we’re going to be benefiting too. So I will just leave it at that and I actually have a happy general council with that answer."

Surprisingly, Fink thinks that a rule that may inspire average people to deploy more money to financial advisers will be good for his business that offers retirement-investing products. Makes sense.

SEE ALSO: Here's what Wall Street and Washington think about the government's new rule that affects $12 trillion of your money

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Activist investors seem to be everywhere right now.

Last year, the number of activist campaigns in the US spiked to its highest level in at least a decade.

Now the line is blurring between who is an activist investor — and who isn't.

That's according to Goldman Sachs' Steven Barg and Avinash Mehrotra, coheads of the mergers and acquisitions shareholder advisory business.

"Companies are judging an idea put forth by shareholders on its own merits and are now less concerned about whether the idea was generated by an activist or non-activist shareholder," said Barg in a recent Q&A shared by Goldman.

"In fact, the distinction between who is an activist and who is not is becoming increasingly blurred and less relevant overall."

Activists tend to demand management changes, pivots in corporate strategy, or some sort of shareholder-friendly move such as a buyback or dividend issuance.

That's becoming more attractive to investors and is increasingly becoming a tool used by traditionally more staid shareholders.

"More mainstream investors, including index funds, are engaging with boards and management teams," said Barg. "We are in an age of more active and sustained engagement among boards, management teams and their shareholders."

The explosion in activist funds has reached far and wide across the market. Here's Mehrotra (emphasis added): 

The growth of activist AUM over the past seven to eight years has essentially created its own asset class. Although the market's returns have contributed to that growth, a meaningful amount of the AUM has come from new capital pursuing activist strategies. This growth has permeated the asset management industry, and we estimate that activist funds are currently invested in at least 25 percent of the number of companies in the S&P 500 Index, comprising over 40 percent of its market capitalization."

And as Barg notes, these activist campaigns are getting what they want more often and faster than in the past.

"The average number of days it takes companies to reach a settlement with activists has gone from 146 days in 2013 to an average of 60 days last year," he said. "Much of that is driven by companies wanting to avoid the time and expense of a protracted proxy fight that could disrupt their business."

Whether or not this sort of activism is a good thing is up for debate.

On the one hand it shows that large companies are listening to shareholder concerns and it could be making them more nimble. Entrenched management is forced to make moves that otherwise they would not consider.

On the other hand, it could be giving in to the fears of some, including BlackRock CEO Larry Fink, that companies are more focused on the short-term results in order to placate shareholders that want immediate returns.

The latter line of thinking might be reflected in recent performance by activist hedge funds, which have underperformed the market in recent months. As Mehrotra points out, many activist hedge funds that have been leading the charges for change are struggling.

"Activist hedge funds typically hold more concentrated, less diversified portfolios so when the markets are volatile — as they were earlier this year and in August 2015 — they have more downside exposure in a dislocation," said Mehrotra.

In sum, there are more activists launching more campaigns at a higher success rate, but whether or not that's a good thing remains to be seen.

SEE ALSO: US companies are undergoing a transformation so huge it's 'nothing short of stunning'

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BlackRock CEO Larry Fink thinks that the US election is hurting the economy.

There was a "huge slowdown" in the first two months of the year, according to Fink, and it was all because of fear.

BlackRock manages $4.6 trillion, and is the biggest investor in the world.

"We have an election here in this country where I think there is more fearmongering than talking about hope and a renewed future — so I think consumers will hold back," he said in an interview with Bloomberg's Erik Schatzker.

Fink pointed to a "pronounced weakness" in first-quarter corporate earnings and slower-than-expected economic growth.

"We have the phenomenon of new party leaders in the United States, with Donald Trump and Bernie Sanders, and I think all of this is an issue around how many people in these democracies feel like they have been left behind, and they are worried about their children's future," Fink said.

And it's not just in the US. Over in Europe, there are Brexit fears and there is political turmoil in Spain.

Fink said that political instability will force leaders across the board to focus on fiscal stimulus.

"I do believe that the candidates in the US are Trump and Clinton," Fink said. "I think both candidates will be talking about fiscal-policy stimulus in the form of infrastructure."

He said that if the US and UK governments were to spend on infrastructure, then it would have a positive impact on GDP in the long run.

"You are creating jobs, creating a better and more efficient grid, better and more efficient roads, ports, airports. So you can get a mileage out of it. So I believe that is what we need in this country," Fink said. "I think that will be the narrative after the primaries."

JPMorgan CEO Jamie Dimon emphasized the importance of infrastructure spending in his annual shareholder letter — as well as education, immigration, and tax reform.

"The problem is not that the US economy won't be able to take care of its citizens — it is that taking away benefits, creating intergenerational warfare and scapegoating will make for very difficult and bad politics," Dimon wrote.

You can check out a video of the exchange and more from the interview on Bloomberg »

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It can be hard for people on Wall Street to agree on anything.

Whether they're on different sides of a trade or simply in competition for business, it's rare that they see eye to eye.

One issue, however, is uniting some of the largest names in finance for one cause: fiscal stimulus.

With big names including JPMorgan CEO Jamie Dimon and hedge fund billionaire Carl Icahn, it seems there is a growing chorus among the major players in finance that the government needs to spend more money.

Larry Fink, CEO of BlackRock, in an interview with Bloomberg Go last Wednesday said spending to build up infrastructure was a huge positive for the US economy.

"You are creating jobs, creating a better and more efficient grid, better and more efficient roads, ports, airports," Fink said. "So you can get a mileage out of it. So I believe that is what we need in this country."

Fink also said he thought such spending would have a meaningful impact on US gross domestic product.

Dimon, for his part, wrote that part of the solution to the "serious issues" facing the US was to increase federal investments.

"I won't go into a lot of detail but will list only some key concerns: the long-term fiscal and tax issues (driven mostly by healthcare and Social Security costs, as well as complex and poorly designed corporate and individual taxes), immigration, education (especially in inner city schools) and the need for good, longterm infrastructure plans," he wrote in his annual letter to shareholders.

In an interview with CNBC on Thursday, Icahn said there would be a "day of reckoning" in the market if fiscal stimulus did not occur, adding that there "could certainly be more spending."

Why fiscal stimulus?

These financial heavyweights are suggesting such a strategy for two reasons — a short-term benefit and a long-term benefit.

On the one hand, there is the short-term need to increase growth. GDP has been lackluster during the recovery from the financial crisis, and it seems that the Federal Reserve has done all it can from the supply side to help stimulate spending. The thinking is that the effectiveness of money-supply stimulus is wearing off and government efforts should focus on demand.

Fiscal stimulus jump-starts the economy by creating jobs. Those people with new jobs are more likely to spend more, thus supporting other industries. Basically, government spending would induce more consumer spending and strengthen household finances to move the wheels of the economy and kick-start growth.

The second argument for fiscal stimulus is the long-term impact, which is what Dimon is really driving at. The idea here is that by investing now, the government could strength the US's position as a global leader and head off some of the under-the-surface problems that could bubble up later.

For instance, one big way the government can spend is investments in highways and bridges. Much of the US's infrastructure system is struggling. Spending now will help maintain the transportation network before the system falls into disrepair.

This spending has benefits that go beyond maintaining physical infrastructure. Highways and bridges facilitate movement that is vital to the economy. Without it, growth will slow, potentially setting up a negative spiral.

Slow growth makes it harder to bring in government receipts while also leaving fewer people with enough savings for retirement. As Dimon noted, this could end up with a generation of people unable to retire and a government unable to support them.

"The problem is not that the US economy won't be able to take care of its citizens — it is that taking away benefits, creating intergenerational warfare and scapegoating will make for very difficult and bad politics," Dimon wrote. "This is a tragedy that we can see coming. Early action would be relatively painless."

So taking action now kick starts the economy.

There's just one problem

The issue, as it stands now, is that executing this sort of government stimulus requires, well, the government.

Many elected officials are worried about the $19 trillion in debt that the US government holds (whether that's actually an issue is another question), so attempting to convince Congress that adding more debt is the solution is a tough sell.

As Icahn noted in his interview with CNBC, it is unlikely that much will happen on the spending front anytime soon. Icahn said Congress was "grid-locked obsessed" and "obsessed with this deficit to a point that I think it's almost pathological."

Additionally, with the election season underway it is unlikely, in the absence of a serious crisis, that the federal government would enact any large-scale spending program.

The likes of Jamie Dimon, Carl Icahn, and Larry Fink are used to getting what they want.

On this occasion though, it looks as if they will be left disappointed.

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This week, Business Insider published the inaugural edition of Business Insider 100: The Creators, celebrating leaders who embody the notion that capitalism can and should be a force for good.

You can check out the whole Creators series here.

We have also launched a series in partnership with public radio's Marketplace, exploring everything from the history of shareholder value to Wall Street's impact on companies like Sears and IBM.

We are not alone in being interested in these topics: Many big investors and company chief executives have discussed these issues.

In February, Larry Fink, the chief executive at BlackRock, the world's biggest investor with $4.6 trillion, sent a letter to CEOs at S&P 500 companies and large European corporations.

Fink, incidentally, appeared at No. 23 on the Business Insider 100: The Creators list.

The letter focuses on short-termism in corporate America and Europe but also in politics, and asks CEOs to better articulate their plans for the future.

Business Insider managed to get a hold of the letter and published it at the time. Given our ongoing work on this topic, we're publishing it in full again below (emphasis added):

Over the past several years, I have written to the CEOs of leading companies urging resistance to the powerful forces of short-termism afflicting corporate behavior. Reducing these pressures and working instead to invest in long-term growth remains an issue of paramount importance for BlackRock’s clients, most of whom are saving for retirement and other long-term goals, as well as for the entire global economy.

While we’ve heard strong support from corporate leaders for taking such a long-term view, many companies continue to engage in practices that may undermine their ability to invest for the future. Dividends paid out by S&P 500 companies in 2015 amounted to the highest proportion of their earnings since 2009. As of the end of the third quarter of 2015, buybacks were up 27% over 12 months. We certainly support returning excess cash to shareholders, but not at the expense of value-creating investment. We continue to urge companies to adopt balanced capital plans, appropriate for their respective industries, that support strategies for long-term growth.

We also believe that companies have an obligation to be open and transparent about their growth plans so that shareholders can evaluate them and companies’ progress in executing on those plans.

We are asking that every CEO lay out for shareholders each year a strategic framework for long-term value creation. Additionally, because boards have a critical role to play in strategic planning, we believe CEOs should explicitly affirm that their boards have reviewed those plans. BlackRock’s corporate governance team, in their engagement with companies, will be looking for this framework and board review.

Annual shareholder letters and other communications to shareholders are too often backwards-looking and don’t do enough to articulate management’s vision and plans for the future. This perspective on the future, however, is what investors and all stakeholders truly need, including, for example, how the company is navigating the competitive landscape, how it is innovating, how it is adapting to technological disruption or geopolitical events, where it is investing and how it is developing its talent. As part of this effort, companies should work to develop financial metrics, suitable for each company and industry, that support a framework for long-term growth. Components of long-term compensation should be linked to these metrics.

We recognize that companies operate in fluid environments and face a challenging mix of external dynamics. Given the right context, long-term shareholders will understand, and even expect, that you will need to pivot in response to the changing environments you are navigating. But one reason for investors’ short-term horizons is that companies have not sufficiently educated them about the ecosystems they are operating in, what their competitive threats are and how technology and other innovations are impacting their businesses.

Without clearly articulated plans, companies risk losing the faith of long-term investors. Companies also expose themselves to the pressures of investors focused on maximizing near-term profit at the expense of long-term value. Indeed, some short-term investors (and analysts) offer more compelling visions for companies than the companies themselves, allowing these perspectives to fill the void and build support for potentially destabilizing actions.

Those activists who focus on long-term value creation sometimes do offer better strategies than management. In those cases, BlackRock’s corporate governance team will support activist plans. During the 2015 proxy season, in the 18 largest U.S. proxy contests (as measured by market cap), BlackRock voted with activists 39% of the time.

Nonetheless, we believe that companies are usually better served when ideas for value creation are part of an overall framework developed and driven by the company, rather than forced upon them in a proxy fight. With a better understanding of your long-term strategy, the process by which it is determined, and the external factors affecting your business, shareholders can put your annual financial results in the proper context.

Over time, as companies do a better job laying out their long-term growth frameworks, the need diminishes for quarterly EPS guidance, and we would urge companies to move away from providing it. Today’s culture of quarterly earnings hysteria is totally contrary to the long-term approach we need. To be clear, we do believe companies should still report quarterly results — “long-termism” should not be a substitute for transparency — but CEOs should be more focused in these reports on demonstrating progress against their strategic plans than a one-penny deviation from their EPS targets or analyst consensus estimates.

With clearly communicated and understood long-term plans in place, quarterly earnings reports would be transformed from an instrument of incessant short-termism into a building block of long-term behavior. They would serve as a useful “electrocardiogram” for companies, providing information on how companies are performing against the “baseline EKG” of their long-term plan for value creation.

We also are proposing that companies explicitly affirm to shareholders that their boards have reviewed their strategic plans. This review should be a rigorous process that provides the board the necessary context and allows for a robust debate. Boards have an obligation to review, understand, discuss and challenge a company’s strategy.

Generating sustainable returns over time requires a sharper focus not only on governance, but also on environmental and social factors facing companies today. These issues offer both risks and opportunities, but for too long, companies have not considered them core to their business — even when the world’s political leaders are increasingly focused on them, as demonstrated by the Paris Climate Accord. Over the long-term, environmental, social and governance (ESG) issues — ranging from climate change to diversity to board effectiveness — have real and quantifiable financial impacts.

At companies where ESG issues are handled well, they are often a signal of operational excellence. BlackRock has been undertaking a multi-year effort to integrate ESG considerations into our investment processes, and we expect companies to have strategies to manage these issues. Recent action from the U.S. Department of Labor makes clear that pension fund fiduciaries can include ESG factors in their decision making as well. We recognize that the culture of short-term results is not something that can be solved by CEOs and their boards alone. Investors, the media and public officials all have a role to play. In Washington (and other capitals), long-term is often defined as simply the next election cycle, an attitude that is eroding the economic foundations of our country.

Public officials must adopt policies that will support long-term value creation. Companies, for their part, must recognize that while advocating for more infrastructure or comprehensive tax reform may not bear fruit in the next quarter or two, the absence of effective long-term policies in these areas undermines the economic ecosystem in which companies function — and with it, their chances for long-term growth.

We note two areas, in particular, where policymakers taking a longer-term perspective could help support the growth of companies and the entire economy:

• First, tax policy too often lacks proper incentives for long-term behavior. With capital gains, for example, one year shouldn’t qualify as a long-term holding period. As I wrote last year, we need a capital gains regime that rewards long-term investment — with long-term treatment only after three years, and a decreasing tax rate for each year of ownership beyond that (potentially dropping to zero after 10 years).

• Second, chronic underinvestment in infrastructure in the U.S. — from roads to sewers to the power grid — will not only cost businesses and consumers $1.8 trillion over the next five years, but clearly represents a threat to the ability of companies to grow. At a time of massive global inequality, investment in infrastructure — and all its benefits, including job creation — is also critical for growth in most emerging markets around the world. Companies and investors must advocate for action to fill the gaping chasm between our massive infrastructure needs and squeezed government funding, including strategies for developing private-sector financing mechanisms.

Over the past few years, we’ve seen more and more discussion around how to foster a long-term mindset. While these discussions are encouraging, we will only achieve our goal by changing practices and policies, and CEOs of America’s leading companies have a vital role to play in that debate.

Corporate leaders have historically been a source of optimism about the future of our economy. At a time when there is so much anxiety and uncertainty in the capital markets, in our political discourse and across our society more broadly, it is critical that investors in particular hear a forward-looking vision about your own company’s prospects and the public policy you need to achieve consistent, sustainable growth. The solutions to these challenges are in our hands, and I ask that you join me in helping to answer them.

Sincerely,

Laurence D. Fink

"The Price of Profits," our series with Marketplace, looks at what happens when profits become a company's product. For more, visit PriceOfProfits.org.

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David Rubenstein of The Carlyle Group, Larry Fink of BlackRock, and Paul Singer of Elliott Management took the stage at the Aspen Ideas Festival in a panel called "Reimagining Capitalism: The Long-Term, Short-Term Debate". At the end of the discussion CNBC co-anchor Kelly Evans asked each of them to share one investment they believe is attractive right now.

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DAVOS, Switzerland (Reuters) - The U.S. is facing a period of dollar strengthening, fuelling likely tensions between the new administration of Donald Trump and the Federal Reserve, the chief executive of asset manager BlackRock told a panel in Davos on Friday.

Larry Fink said at the World Economic Forum that he expected that Fed interest rate hikes this year could push up the value of the U.S. currency "significantly".

"We all should be aware right now that we are going to be living a world of a strong dollar," he said.

(Reporting by Ben Hirschler; Editing by Noah Barkin)

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